TORONTO, Oct 4 (Reuters) - Toronto’s main stock index plunged to a 23-month low on Tuesday but recovered most of the day’s losses as a late-day bargain-hunting rush and signs of more U.S. stimulus measures helped offset fears over Europe’s debt crisis.

Traders also cited talk that European finance ministers had agreed to prepare action to safeguard their banks as another reason for the snap-back on stock markets in late dealings.

The TSX failed to turn positive, but U.S. stock indexes were swept higher in a dramatic rally heading into the close. [.N]

The TSX had a long way to come back after dropping more than 3 percent early in the day as the possibility of another global recession sparked a sell-off that hit financial shares and commodities hard. The day’s low marked a 19 percent fall since the start of the year and a 24 percent decline from the 2011 high the index reached in March.

“A lot of the uncertainty and a lot of the volatility is being generated out of Europe,” said Stephen Wood, chief investment officer for North America at Russell Investments in New York, adding that there were also concerns about soft U.S. data and slowing growth in China.

“It’s not a market situation, it’s a political situation ... investors are assuming the worst. There are a lot of very bad scenarios that Europe represents and it’s not clear which one is likely to happen.”

Greece appeared more likely to default on its debt after euro-zone finance ministers postponed a vital aid payment to Athens until mid-November. [ID:nL5E7L419D]

The impact of a possible default on the global economy and particularly on the banking sector worried markets after EU ministers said they were reviewing the size of private-sector involvement in a second bailout package for Greece.

Among the heaviest decliners on the TSX were gold mining shares, which sold off 3.4 percent on sagging bullion prices. [GOL/]

Goldcorp (G.TO) was down 3.8 percent at C$45.94, and Barrick Gold (ABX.TO) lost 3 percent to C$47.14.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended down 73.93 points, or 0.66 percent, at 11,177.91. The day’s low was 10,848.19, the weakest level since November 2009. Six of the 10 index sectors were down.

Financial shares dropped in sympathy with battered European banks, despite Canadian banks’ limited exposure to European debt. Markets were focused on collapsing confidence in French-Belgian municipal lender Dexia SA (DEXI.BR), which became the first European bank to have to be bailed out due to the euro zone’s sovereign debt crisis. [ID:nL5E7L419D]

Royal Bank of Canada (RY.TO) lost 1.8 percent to C$45.95, Toronto-Dominion Bank (TD.TO) was down 0.7 percent at C$71.14, and Bank of Nova Scotia (BNS.TO) was off 1.8 percent at C$50.20.

“In this market you don’t know how far stupidity will carry on,” said Ron Meisels, technical analyst and president of Phases & Cycles, pointing to the next support level around 10,700.

“We’re probably completing a leg of the bear market that started possibly as early as April but certainly in July, and if we do compete this here than maybe there will be some bargain-hunting.”

Looking to the example of the market crash in 1987, Meisels noted that it took more than eight months for stocks to turn around, and said investors might want to use any near-term rallies to generate cash.

Helping to put a bottom on the market’s slide on Tuesday was a speech by U.S. Federal Reserve Chairman Ben Bernanke, who said the central bank was ready to act again to support the economy. [ID:nN1E7930IZ].

Some investors said Bernanke’s statement left the door open to another round of quantitative easing policies, but speculated markets still have further to fall before more U.S. stimulus, or a broader resolution in Europe, is announced.

Among the lead gainers on the index, Teck Resources TCKb.TO surged 8 percent to C$30.99, and pipeline company Enbridge (ENB.TO) rose 2.4 percent to C$33.36.